Jurisprudentiol - Monday's cases

By Vijay Kumar

Legal Corner Icon — the image was hosted by the publisher and was not captured.Customs

Seizure of Gold from under sea - Captain of vessel arrested on charge of throwing gold into sea - Trial court acquits accused - Revenue Appeal Dismissed: HC

THE accused was arrested in May 1987. After seven years, the trial court acquitted him. Customs took the matter in appeal to the High Court which dismissed the appeal in July 2014 - after 27 years!

The statement under section 108 is admissible and it can be relied also. However, if at all it is retracted, then, weightage can be given to it only if there is corroboration on other material particulars. In the present case, as the panchas did not corroborate and the prosecution did not examine the other panch, that material evidence collapsed.

Income Tax

Whether disallowance under section 14A can exceed total administrative expenditure debited by assessee in Profit & Loss account - NO: ITAT

THE assessee is a non-banking financial company deriving interest income from money lending and income from investment. The assessee had shown short term capital gain and long term capital gain from the sale of shares. The assessee, during the course of assessment proceedings, in response to the show cause notice, filed details submissions with regard to the overall transactions of shares, holding period, treatment given in the books, number of transactions undertaken and the history of the assessee's case in the earlier years. Assessing Officer rejected the assessee's contention on the ground that the purchase and sale of shares was not an unrelated activity but incidental to the business of the assessee. The assessee had continuously and systematically carried out the activity of trading in shares over the period of one year and had borrowed funds to fund his activity for purchase and sale of shares. The Assessing officer was of the view that the assessee had shown all the characteristics of a trader rather than an investor. Thus, the profit claimed as capital gain was taxed as business income.

THE issue before the Bench is - Whether disallowance under section 14A can exceed the total administrative expenditure debited by the assessee in the Profit & Loss account. And the answer goes against the Revenue.

Central Excise

Demand of duty on clandestine clearances - findings of Tribunal on suppression of manufacture and removal of dutiable product cannot be faulted - However, MODVAT credit extended on raw materials: HC

THE appellant is a small-scale industrial unit engaged in the manufacture of acid slurry, soap oil and waste weak acid since 1989-90. The main raw materials for manufacture of acid slurry are: linear alkyle benzene (LAB), oleum and water. The appellant was availing Modvat credit of duty paid on the raw materials after filing necessary statutory declarations before the concerned authorities.

There was an inspection at the premises of the appellant by the Directorate General of Anti-Evasion, Hyderabad certain records were seized. Based on the inspection and the information obtained, a show-cause notice was issued alleging that the appellant had not accounted for purchase of raw material namely, LAB made from a public sector organization, M/s.Tamil Nadu Petro Products.

Aggrieved by the order of Commissioner confirming the demand, the appellant filed an appeal before the CESTAT and the same was dismissed vide 2004-TIOL-446-CESTAT-BANG.

The appellant contended that the order of the Tribunal is purely based on surmises and conjectures and there is no material whatsoever evidencing purchase of LAB by the appellant and the same having been received in the Factory by the appellant. There is no material with respect to manufacture of acid slurry, a product which attracts higher rate of duty and also there is no material evidencing clearance of acid slurry from the premises.

See our Columns Monday for the judgements